International Marketing
Tom Gillpatrick, Ph.D.
Juan Young Professor of Marketing
School of Business Administration
Portland State University
Spring Term 2012
Week Seven: product Strategy
www.sba.pdx.edu
PRODUCTS AND
SERVICES
• Product functions
across culture
• Standardization vs.
customization;
adaptation as a
compromise
• Communication vs.
product adaptations
• Branding
• Services
Elements of a Product
Augmented
Product
Installation
Tangible
Product
Packaging
Delivery
and
Credit
Brand
Name
Core
Benefit or
Service
Quality
Features
AfterSale
Service
Core
Product
Styling
Warranty
SOURCE: Czinkota & Ronkainen. Global Marketing.
Country of Origin Effects
• Perception of product
– quality (e.g., Japan, Germany)
– elegance and style (e.g., France, Italy)
• Historical associations
• Positioning strategies
– Emphasis on origin (e.g., French wine)
– De-emphasis/obfuscation of of country of
origin (e.g., French beer, American products
with French language labels)
Services
• Scope
• Characteristics
–
–
–
–
Intangibility
Heterogeneity
Inseperability
Perishability
• The Service-Tangible Product
Continuum
Service Issues
• Country expectations
–
–
–
–
Willingness to pay
Quality
Speed
Competence of
personnel
– Courtesy/deference
– Decision making
authority of personnel
• Cost
• Availability of skilled
personnel
• Control over personnel
performance
• Overhead issues
Extend, Adapt, Create: Strategic
Alternatives in Global Marketing
• Extension – offering product virtually
unchanged in markets outside of home
country
• Adaptation – changing elements of design,
function, and packaging according to needs
of different country markets
• Creation – developing new products for the
world market
Global Product Planning:
Strategic Alternatives
Communication
Product
Same
Different
Same
Strategy 2:
Product Extension
Communication
Adaptation
Strategy 1:
Dual Extension
Different
Strategy 4:
Dual Adaptation
Strategy 3:
Product Adaptation
Communication
Extension
Product Need Satisfaction
• Products serve different purposes in
different countries; e.g.,
– Autos: transportation in U.S.; largely status symbol
in Japan
– Toothpaste: Cavity prevention in U.S.; breath
freshener in Ireland
– Tang: convenience, low cost beverage in U.S.;
pineapple flavor as special treat in Brazil (real
oranges are cheap and plentiful)
Physical Product vs.
Communication Adaptations
Product
adaptations not
needed
(extension)
Product
adaptations
needed
Communication
adaptations not
needed
(extension)
Some industrial
equipment; some
electrical
equipment
Gasoline; laundry
detergent
Communication
adaptations
needed
Bicycle; some fast
food; chewing gum
Greeting cards;
some fast food
Domestic
Compass-equipped prayer rug; hand
equivalent does
powered washing machine; bottled
not exist (product green tea
invention)
Standardization versus
Customization
• Common Customer Needs
– Convergence in Drinking Patterns
– Comparison of Recognitions Around Car
Value Between Europe, USA, and Japan
– Differences in Car Requirements for Various
European Countries
11
Product Design Philosophies
ETHNOCENTRIC
STANDARDIZATION
GEOCENTRIC
ADAPTATION
POLYCENTRIC
CUSTOMIZATION
REGIOCENTRIC
Reasons for Standardization
• Avoiding high costs of
standardization, if
applicable
• Technological intensity
– Reduced confusion
– International compatibility
among product group
components
– Faster spread of rapid life
cycle products
• Convergence of global
consumer tastes/needs
• Country of origin
positioning
Standardization--Advantages
• Benefits
– Economies of scale
– More resources available for
development effort
• Better quality
– Enhanced customer preference (?)
– Realistic when all cultural needs
cannot be met
• Global customers
• Global segments
Standardization-Disadvantages
• Unnecessary features
• Vulnerability to
trade barriers
• Strong local
competitors
Product Adaptations
• Mandatory
– legal requirements
– infrastructure
– physical requirements
• “Discretionary”
– local tastes
– fit into cultural
environment
Motivations for Adaptation
• Legal
• Infrastructure
• Consumer
demographics
• Culture
– Religious impact
– Cultural context of use
• Local traditions/
customs—e.g.,
– Food usage occasions
– Aesthetic preferences
• Local usage conditions
• Pricing pressures/
tradeoffs
The Reality: Continuum of
“Mandatoriness”
Legal
requirements
Completely
mandatory
Electric
Voltage
Product
labeling
Manner of use
Performance
Optimization
Strong
Cultural
Conflict
Economic
Suitability
Completely
“discretionary”
Taste
Optimization
Style, color
Mandatory Adaptation Issues
• Choices in approach to mandatory conditions-examples
– Power drills with noise suppression filters
– Non-public ear piercing in Japan
• Distribution and promotion implications
• “Arbitrary” standards (e.g., TV, DVD players)
• Conflicting rules between countries—may not be
possible to make product legal in all
Compatibility Issues
• Basic requirements
– E.g., voltage, infrastructure, plugs
• Compatibility
– Ability to be used within a local system (e.g.,
frequencies, electronic protocols)
• Multi-system compatibility
– Product can be set to operate within several
standards
Legal/Standards
Constraints
Standardization versus
Adaptation
Standardization versus
Adaptation
• Globalization (Standardization)
– Developing standardized products marketed worldwide
with a standardized marketing mix
– Essence of mass marketing
• Global localization (Adaptation)
– Mixing standardization and customization in a way that
minimizes costs while maximizing satisfaction
– Essence of segmentation
– Think globally, act locally
Factors Moderating Cultural
Footprints
•
•
•
•
•
Level of economic development
Country size & history
Geographic region within country
Urban v. rural areas
Demographic group
–
–
–
–
Rich v. poor
Male v. female
Adults v. children
Ethnic & religious group
Dimensions of the
Cultural Footprint
• Food symbols & meanings
– Food as fun, brand identity, bonding
via shared meaning
• Food consumption rituals
– Food acquisition patterns, service interactions,
food preparation
• Food & Family Life
– Children as consumers, eating alone & snacking
• Nutrition & heath
– Food safety, consumer education, over-nutrition
Multinational Diffusion
• Five Product Characteristics
– Relative advantage, Compatibility, Complexity,
Trialability, Observability
– National Innovativeness vs Individualism
29
To Adopt or Not to Adopt: How Will
Consumers Answer the Question?
• Some causes of resistance to
adoption
– perceived risk--financial and social
– self image
– effort to implement and/or learn to
use the product
– incompatibility
– inertia
Adopter Categorization of the
Basis of Relative Time of Adoption
of Innovations
34%
Early
majority
2 1/2%
Innovators
13 1/2%
Early
adopters
34%
Late
majority
16%
Laggards
Time of adoption innovations
New Technology
In Past:
Today:
8-Tracks, Betamax & DIVX
3G, 4G, HDTV, ??
• What’s right/wrong with
DIVX?
–
–
–
–
Relative advantage
Compatibility
Complexity
Divisibility
– Communicability
Societal Conditions Conducive
to Diffusion
•
•
•
•
Modernity
Homophily
Physical distance
High proportion of women in
the workforce
• Opinion leadership